Keep Point Development Ltd. v. Chan Chi Yim & Ngai Yuet Fong & 62 Other Defendants
Read the full judgment text of HCMP 6550/1998 on BabelCite. This High Court CFI judgment was delivered on 14 March 2000.
1. The plaintiff in these proceedings is a wholly owned subsidiary of China Merchants Properties Development Ltd (China Merchants), part of the China Merchants Group, and is the owner of a property at 112-134 Wang Fung Street, and 84 Sheung Fung Street, Wong Tai Sin, Kowloon. The 63 defendants were all owners of units in the property which formerly stood on that site and which were sold by them to the 1st Third Party, Full Country Development Ltd (Full Country) in 1994. Full Country sold the pro
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HCMP006550/1998 HCMP 6550/1998 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 6550 OF 1998 ____________
____________ Coram: Woolley DJ in Court Dates of Hearing: 13-17 December 1999, 8-11 and 15-16 February 2000 Date of Judgment: 14 March 2000 _______________ J U D G M E N T _______________ 1. The plaintiff in these proceedings is a wholly owned subsidiary of China Merchants Properties Development Ltd (China Merchants), part of the China Merchants Group, and is the owner of a property at 112-134 Wang Fung Street, and 84 Sheung Fung Street, Wong Tai Sin, Kowloon. The 63 defendants were all owners of units in the property which formerly stood on that site and which were sold by them to the 1st Third Party, Full Country Development Ltd (Full Country) in 1994. Full Country sold the property as a vacant site to the plaintiff on 30 December 1996. The 2nd Third Party, Messrs Yuen Sung & Co. (Yuen Sung) is the firm of solicitors who acted for the defendants on the sale to Full Country in 1994. The hearing before me only concerned the proceedings between the plaintiff and the defendants, but the 2nd Third Party was given leave to appear at, and take part in, the proceedings by their counsel Mr Ronny Tong S.C. Full Country, now being in liquidation and represented by the Official Receiver, has taken no part. 2. The sale by the defendants to Full Country in 1994 included option agreements being entered into, whereby the defendants were entitled to purchase units, equivalent to those they owned, in the new building to be constructed on the site. For reasons which are given below, these option agreements were not registered in the Land Registry prior to the sale in 1996, and a declaration is sought by these proceedings that they are null and void as against the plaintiff under the provisions of the Land Registration Ordinance, Cap. 128, that the defendants are not entitled to register the agreements, and an injunction to restrain them from doing so. 3. The property on the site in question, prior to its demolition in or about 1995, was called Sheung Fung Building, and comprised blocks A to D, and all the defendants had been owners of either residential units or shops. This was a comparatively old property, having been built in about 1969. Commencing in about 1993, the owners of units in the building were approached by representatives acting for Full Country with proposals for redevelopment of the property, and negotiations were conducted by one Mr Cheng Kwok Tung the general manager of Full Country, who informed the owners that the boss of Full Country was Mr Cheng Kwok Fai, who was understood to be his brother, and a respected member of the community, being a senior member of various charitable groups such as Pok Oi Hospital, the Rotary Club and the Lions Club. 4. The proposals put to the owners were that they would sell their units to Full Country, and receive 10% of the purchase price, the balance of 90% being withheld as payment for a similar unit in the new development when completed or in another building nearby called Profit Mansion, also being developed by Full Country. In effect it was a "swap" arrangement. In addition they were to receive a monthly payment during the construction period as "rental reimbursement" and a payment in respect of a moving allowance. Finding the proposals attractive, the defendants entered into provisional sale and purchase agreements embodying these terms. Formal sale and purchase agreements in the usual form, and excluding any reference to the swap arrangement, were then signed, followed shortly thereafter by assignments of the properties. At the same time, each of the defendants and Full Country entered into a further agreement (the option agreement), whereby the defendants were granted options to purchase new units, the consideration for which was deemed to be paid under Clause 1 as the balance of the purchase price for their old units. 5. The option under the agreement was exercisable within one month of notification that Full Country was in a position to pre-sell units in the new building, or within one month of issuance of the Occupation Permit, and contained in particular the following terms:
6. The option agreements, as well as the sale and purchase agreements and assignments, were signed by all except one of the owners at the offices of Messrs Yuen Sung & Co., the 2nd Third Party (Yuen Sung), who were appointed by Full Country to act for the defendants, their fees also being paid by Full Country. The exception was a Mr Cheung Chiu Po, who was separately represented on the sale, and whose option agreement was registered (the Cheung Chiu Po option). The assignments were duly registered in the Land Registry in blocks on 31 May 1994 and 4 October 1994, with one registered on 10 September 1994. On the face of the record at the Land Registry, all the units except one had been unconditionally assigned to Full Country. 7. Full Country then proceeded with the demolition of the building which was completed by the end of 1995. Meanwhile the defendants found that their rental reimbursements were not being paid on time. There would be periods when they fell badly into arrears, then some would be paid. They then heard rumours of the property being sold, but were assured by Yuen Sung that this was denied by Full Country. 8. The difficulty in making payments to the defendants appears to have been one of the first signs that Full Country was having financial difficulties, in particular raising capital to proceed with the development, and in 1996 Cheng Kwok Fai of Full Country approached China Merchants to seek assistance with finance for the development on a profit-sharing basis. A series of negotiations followed, which I shall return to later, which culminated in the sale of the property on 30 December 1996 to the plaintiff, which was formed for the purpose, with an option agreement allowing Full Country to buy back the project subject to certain conditions. These conditions were not in the end met by Full Country and the plaintiff remained the sole owner of the property. The assignment to the plaintiff was registered in the Land Registry on 31 January 1997. 9. The defendants became aware of the sale in early 1997 through newspaper reports, but, on confronting Cheng Kwok Tung, were assured that it was only a loan. The units in Profit Mansion then became available, and a number of the defendants were given keys to these and moved in, although no assignments were executed. In 1998 the occupiers of these units began receiving letters from banks and finance companies demanding repayment of mortgage loans, and Cheng Kwok Tung admitted that these units had been mortgaged by Full Country. By October 1998 the defendants realised that they may well have been the victims of, at best a breach of contract, and at worst deception, heard that Full Country was in the process of being wound up, and that Cheng Kwok Fai had absconded, and reported the matter to the Commercial Crimes Bureau. A winding up order was made against Full Country on 4 November 1998. Later in November, and in December 1998 the defendants lodged their option agreements with the Land Registry for registration. These proceedings were commenced on 3 December 1998. 10. The plaintiff relies on section 3 of the Land Registration Ordinance, Cap 128, which reads as follows:
And, although it is the case of the plaintiff that it had no notice of the defendants' option agreements, in so far as it may be found that there was notice, section 4 of the Ordinance is also relied on:
11. Both Mr Martin Lee SC for the defendants and Mr Tong for the 2nd Third Party have approached this case on the basis that the plaintiff needs to establish that it is a bona fide purchaser for value under section 3(2) of the Ordinance, and contend that the onus is accordingly on the plaintiff to discharge the burden of proof to bring itself within that definition. If it is section 3(2) that concerns us here, that is certainly true. As Mummery LJ said in Barclays Bank Plc. v Boulter [1998] 1 W.L.R. 1 at p. 8:
12. However, as Sir John Swaine for the plaintiff has pointed out, his case here rests on section 3(1), not section 3(2), in that he is claiming priority over the defendants by reason of prior registration, and that brings into play the protection given by section 4, even if the plaintiff had notice. He submits that, if the plaintiff comes within section 3(1), it has a clear title extinguishing any claim by the defendants, and its priority is only defeasible if it has been guilty if fraud, and the burden of proving fraud lies on those alleging it. 13. In support of this contention he has drawn my attention to a number of authorities, commencing with the decision of the Full Court in Kwok Siu Lau v Kan Yang Che [1913] 8 HKLR 52 where de Sausmarez J said, at p. 66:
14. And in respect of the contention put forward in that case that the effect of section 4 would be to put bona fide and mala fide purchasers in the same position, pointed out, at p. 65:
15. This was followed by the Court of Appeal in Ho King Yim v Lau King Mo [1979] HKLR 268 where it was held that a charging order registered after a sale and purchase agreement was registered, but before the assignment, could not take priority to the interest of the purchaser or his successors. 16. This must be right. The effect of section 3(1) must give a good transferable title to the purchaser, otherwise it would produce an absurdity. In the case of a lease for a term of years which is registered it is clear that, as against a subsequent purchaser, who also registers, the lease will have priority and the assignment to the purchaser takes effect only as a reversion upon expiry of the lease. But in the case of a purchaser who registers first, priority can only mean that the title conferred by the assignment, which would otherwise be a complete and unfettered title, by operation of the section is still such, even if the purchaser had notice of the prior unregistered interest, provided of course that no fraud was involved in the transaction. And the purchaser must similarly be able to pass on such unfettered title, otherwise his title would be largely meaningless, if the only effect of the section were to postpone the later registered interest until the purchaser relinquished his title, which it is unlikely in those circumstances he would ever be able to do, at least not by sale. In the same way, a mortgagee, if all he acquired under the Ordinance was a postponement of the later interest, could never realize his security by sale, if the later registered interest took effect the moment he attempted to do so. 17. Neither counsel for the defendants nor for the 2nd Third Party has sought to deny that section 3(1) has the effect of giving priority to the plaintiff. Indeed, Mr Tong in his submission conceded that there was "no question on priority", and both he and Mr Lee have based their cases on the plaintiff having to show that it is a bona fide purchaser within section 3(2). This they say is because the plaintiff seeks not just a declaration that it has priority, but that this gives it a clear title that it can pass on to a subsequent purchaser. Neither counsel sought to address the effect of priority, which in my view can only be as I have found above. Neither is fraud alleged. The submissions of counsel for the defendants and 2nd Third Party and their cross-examination over several days was directed almost solely to the question of whether the plaintiff had notice of the option agreements, and was not acting bona fide. But the requirement of bona fides does not apply to section 3(1). Where the wording of the statute is unambiguous, and the question of notice is specifically excluded from consideration, it is clear from the authority of Midland Bank Trust Co. v Green [1981] AC 513 that equitable doctrines should not normally be read into modern statutes, that it is not fraud to rely on legal rights conferred by statute, and clear enactments as to registration and priority should be interpreted according to their tenor. 18. As will be made clear below, I can find no evidence of fraud on the part of the plaintiff in this case, and accordingly have no hesitation in finding that the plaintiff must succeed under section 3(1) of the Ordinance in establishing priority by reason of the earlier registration of its assignment, and must therefore be entitled to the relief claimed. 19. Although Sir John Swaine did not rely on section 3(2), it is apparent that both the other parties thought that he did, and based their arguments and the conduct of their cases accordingly. Indeed, he might well have done, and for the sake of completeness I will also look at this aspect and whether the plaintiff is also entitled to the relief claimed under that section, taking into account, as one must for that purpose, the question of bona fides. For this it is necessary to look further into what transpired between the plaintiff and Full Country, and the evidence before me, as the defendants rely on a lack of bona fides on the part of the plaintiff in its dealings with Full Country in connection with this site. Although, as I understand it, fraud is not alleged, it is contended for the defendants that there was here an element of sharp or unconscionable conduct that takes the plaintiff out of the category of a bona fide purchaser. As Mr Lee has conceded, if he can show only notice of the defendants' options, they must fail: they must show something more to establish a lack of bona fides. 20. The defendants' case on this falls into two distinct parts: first, the evidence which they say points to the plaintiff having actual, imputed or constructive notice of the defendants' option agreements; and second, the conduct on the part of the plaintiff in the various transactions which, they say, shows that they were not acting bona fide. 21. I accept, on the authorities, that under this section, the burden of proving bona fides falls on the person claiming it, in this case the plaintiff, and I must consider the evidence in that light. The plaintiff's dealings with Full Country 22. China Merchants first enter the picture in relation to Full Country in about August 1996 when their property development subsidiary, China Merchants Properties Development Ltd (China Merchants Properties), was approached by Mr Jeffrey She of Richard Ellis Ltd with a proposal for the sale of the Sheung Fung Street site by Full Country to them. The contact at China Merchants was Mr Wong King Yuen, who was the assistant manager of China Merchants Properties and the manager of the plaintiff, who was the only witness to give evidence on behalf of the plaintiff. He reported to, and took instructions from, a Mr Ma Rong, the general manager of China Merchants Properties. It was Mr Wong who was directly engaged in all these negotiations, through Mr She, who, it is apparent, acted as a middleman or broker. However, Mr Wong had no authority to bind China Merchants Properties without direct instructions from Mr Ma, and at each stage reported to him in writing to seek approval for his proposals. 23. Negotiations were initially on the basis that the site would be sold to China Merchants Properties, and Mr Wong attended a site visit where he met Cheng Kwok Fai, and was supplied by Mr She with a valuation report by C Y Leung & Company Ltd, surveyors and valuers, which valued the site at $255 million. However, Full Country clearly did not want to totally relinquish their interest in the site, as they proposed that they have an option to repurchase the commercial units and about 18,000 square feet of the residential units. Possibly they still intended then to honour their commitments under the option agreements. However, negotiations were not successful and this proposal was abandoned. Full Country then made a further offer to sell 85% of the property to China Merchants Properties and negotiations proceeded on the basis that it would be sold to a company in which China Merchants Properties would have 85% of the shares and Full Country 15%. The price agreed was $230 million. 24. Mr Wong reported to Mr Ma on the commercial viability of the proposal after seeking advice from Mr Hodgson, a solicitor with Livasiri & Co. (Livasiri), Ms Mak Wing Han, an assistant manager of China Merchants Properties' finance department, and Ms Sin Chiu Ying their company secretary. The proposal was approved by Mr Ma, but this too was aborted when there was a delay in signing the agreement for sale, largely, it appears, because of reluctance on the part of Cheng Kwok Fai when property prices were rising. 25. The next series of negotiations, in early November 1996, was in respect of a proposal by Full Country that China Merchants Properties should make a loan to enable them to redeem their mortgage on the site, China Merchants Properties would undertake the development and earn a management fee, and in default of repayment, the site would revert to China Merchants Properties. Again, Mr Wong reported to Mr Ma on the commercial viability of this scheme, with detailed calculations of the likely profit, and again it was approved. However, again the proposal failed after legal advice given to China Merchants Properties that the default provision could amount to a penalty and be unenforceable. 26. Negotiations were then reopened on the basis of an outright sale to China Merchants Properties for $255,000,000.00 but with an option to Full Country to repurchase within 14 months for the same sum plus construction costs already incurred, a management fee, and $72,000,000.00. Again, a report was made to Mr Ma on this proposal with a careful calculation of the profit whether the option was exercised or not, and again it was approved. It was further agreed that the purchase should be by the plaintiff, that the two shares of the plaintiff would be held by a British Virgin Islands company called Multiland Resources Ltd, whose one share would be held in turn by another British Virgin Islands company, Superland Resources Ltd, whose one share would be owned by China Merchants Properties, and, in the event of Full Country exercising the option, would be transferred to Full Country, thereby avoiding the stamp duty payable on transfer of the property, and with tax advantages. Mr Lee has sought to make much of this arrangement with a suggestion that the parties were attempting to keep the transaction secret. I find no reason to suspect any ulterior motives here. The tax benefits are obvious, and there was never any real possibility of secrecy when the plaintiff's registered office was the same as China Merchants Properties, and its directors were known to be senior members of that company, as became apparent when the observant members of the Press reported the transaction in the newspapers shortly after it was concluded. There was, in any event, a good reason for China Merchants Properties to distance themselves to some extent from the development, as this was the first time they had been involved in a project such as this in Hong Kong, their main business being developments on the mainland, and commercial projects here, and were not sure of the effect on their standing in this field. As I have said, I find nothing sinister in this. This sale proceeded and the property was assigned to the plaintiff on 30 December 1996. 27. However, in the course of the usual searches prior to a sale of land, the Cheung Chiu Po option had come to light and initially the agreement for sale and purchase included a provision for the retention of $16,000,000.00 to cover the liability under that option. As this placed Full Country in some difficulty in repaying their loan due on 31 December, this was replaced by a further agreement by which, in consideration of the plaintiff releasing the $16,000,000.00, Full Country undertook to effect a cancellation of the option and deliver the cancellation to the plaintiff by 29 January 1997, failing which they would forfeit the right under their option agreement to repurchase the property. Full Country did not deliver a cancellation by 29 January, instead submitting an agreement with Cheung Chiu Po to cancel in return for payments which would not have been completed until 31 May 1997. The plaintiff considered the undertaking had not been complied with, and litigation ensued with Full Country, which was settled with Full Country abandoning their claim, but the plaintiff allowing them to enter into a further agreement permitting them a part in the sale of the development on condition that a payment was made by them of $30,000,000.00 by 16 August 1998. That payment was not made and Full Country lost their right under that agreement. 28. One further attempt was made by Full Country to repurchase the property in September 1998 when Mr Wong was approached by Mr She and Cheng Kwok Tung with a proposal to purchase the property by way of the sale of the shares in Superland Resources Ltd for $410,000,000.00. Mr Wong advised them that, in the light of what had already transpired between the parties, they should negotiate by way of solicitors, which is what they did. However, it was in October 1998 that it came to light that forged agreements for sale and purchase had been registered in respect of units in the property, and the police were informed. No further dealings with Full Country took place and it was wound up shortly thereafter. 29. These dealings have been described by Mr Lee as a complex web, shrouded in secrecy, and giving rise to suspicion that they were colluding in something underhand. I cannot accept this. On the part of the plaintiff, it was all one series of negotiations for a property transaction, which was the business they were in. It was only unusual in that it was the first time that they had entered into such a development in Hong Kong, but it is clear from the evidence of Mr Wong, who was the plaintiff's property negotiator, that from first to last the only considerations were commercial ones, and what profit could be made for the group. This is also clear from the reports made by him at each stage. The only other unusual aspect of the matter is the tenacity of Full Country, and Cheng Kwok Fai in particular, in wishing to involve themselves in the development even at a very late stage, when they were clearly in financial difficulties and in dispute with the plaintiff. Apart from still seeking to make a profit themselves from the project, I would like to think that they were trying to put themselves in a position where they might yet honour their obligations to the defendants. But neither do I see anything sinister in the plaintiff continuing negotiations with them on a purely commercial basis, until it became apparent in late 1998 that a criminal offence had probably been committed. Notice of the defendant's options 30. The only witness called by the plaintiff was Mr Wong, a matter commented on by counsel for the defendants and the 2nd Third Party, and with which I shall deal shortly. He was the person who had the closest dealing with this matter throughout, and, indeed, the only one in China Merchants Properties who was conducting negotiations in respect of this property. Having listened to his giving evidence and being cross-examined over some 6 days, I accept him as an honest witness attempting to recall events to the best of his ability. I accept that his part in all this was as a negotiator in a commercial transaction and that he had no actual notice of any of the defendants' option agreements until late 1998 when China Merchants Properties were informed by the defendants' solicitors and Mr Wong attended a meeting with them. There is little evidence of any dealings by any other member of China Merchants Properties with Full Country or the Cheng brothers, or even that they were acquainted. The only question as to notice therefore is whether imputed or constructive notice can be attributed to the plaintiff. Imputed or constructive notice 31. There are a number of matters which arose in the course of dealings between the plaintiff and Full Country which Mr Lee says put the plaintiff on notice that there may be other interests affecting the property. He relies in particular on the judgment of Rogers JA in Sun Sek Haw & ors v Au So Kum CACV 215 of 1998, where, at p. 12, he says:
32. The first matter relied on by the defendants in this context is the valuation report dated 4 July 1996 prepared by C Y Leung & Co. Ltd Amongst other information contained in that report is a complete list of the memorials recording the assignment of the units of the previous owners to Full Country, together with the price paid for each. It is pointed out on behalf of the defendants that the sharp differences in the prices paid should have put the plaintiff on notice that there may have been something unusual about the deals which they should have investigated. 33. Mr Wong's evidence about this is that he was not very interested in that part of the report. His interest was almost entirely in the valuation itself from a commercial point of view. He said that he would have flicked through the rest of the report, but taken little interest in how or when the property had been acquired. I accept this. His function was to look at a potential purchase from the angle of the profit to be made for his company, and as an experienced property dealer, he would know that any problems as to title would be revealed by the necessary searches later. 34. In any event, I am not satisfied that a close examination of the figures listed would have given him cause for concern. It is true that there are differences in prices paid for similar properties, and, in hindsight, it may well be that many of those differences were as a result of the option deals, some taking higher prices instead of an option. But, as Sir John Swaine points out, five of the defendants who had options were paid prices considerably more than the prices paid to the majority, and four owners were paid lower prices even though they were not given options as well. On the evidence of the defendants' own witness, Mr William Wong, senior director valuation and consultancy with FPD Savills, higher prices in such a property could be a result of what is known as "last unit syndrome", where an owner, knowing a developer is keen to purchase all the units, holds out for a higher price at a late stage. He also agreed with the plaintiff's Mr Wong that, when doing a valuation, he would value the property free of encumbrances and leave the matter of title to the solicitors. 35. There is accordingly nothing in this report which should in my view have raised the concern or suspicions of the plaintiff. 36. The next matter in time was a draft provisional sale and purchase agreement apparently prepared by Mr She and sent to Mr Hodgson, a solicitor with Messrs Livasiri & Co, requesting his comments. That draft included the words "The Property shall be sold free of all incumbrances and option agreements" (my italics). Mr Hodgson, in amending other parts of the draft, bracketed these words and put a question mark by them, obviously querying whether they should be there. As there was at that time no prospective purchaser of the site, this was presumably part of Mr She's marketing operation of the property. In the faired version of the draft, the words were retained. The obvious inference from this is firstly that Mr Hodgson was not aware of any option agreements and was querying the inclusion of the reference, and secondly that Mr She, possibly from carrying out his own land search, was aware of the Cheung Chiu Po option which was registered, and accordingly had to include a reference to it. I am not satisfied that this is evidence of anything other than that. If Mr She knew of the defendants' options, which in my view is unlikely, as Full Country would not lightly advertise a fact which would have a devastating effect on the price, this knowledge cannot be imputed to the plaintiff. As I have noted above, Mr She was acting as a broker or middleman. He was not the plaintiff's agent, although in the event of a successful deal he may well receive commission from them, as is not unusual in property deals arranged by such people. If he was acting on behalf of any principal, on the evidence before me it could only have been Full Country. 37. The question of the enquiries which might have been made by Livasiri arose again in their conduct while acting for the plaintiff in the sale of the property. In November 1996 they were sent by Full Country's mortgagee's solicitors the title deeds to the property "as per the 94 schedules enclosed herewith". In the schedules there were two items which had been deleted, one listed as "Agreement dated 31.5.94" and another "Agreement for Sale and Purchase memorial No. 6134909". Of course the first is now known to be an unregistered option agreement, and the other the Cheung Chiu Po option. It is the defendants' contention that Mr Hodgson should have made enquiries about these and failure to do so put him on constructive notice of their contents, and thereby imputed notice to his client, the plaintiff. 38. This is, in my view, placing too high a burden on a conveyancing solicitor. He had before him 94 schedules and some 1,500 documents of title, none of which on a reasonable examination gave any cause for concern as to title. To expect him to ask for and examine two items, which, being deleted, may well have been entered in error, is a counsel of perfection far above the reasonable enquiries expected in such circumstances. In any event, the Cheung Chiu Po option became apparent from the usual land search, which also revealed no other incumbrances, which would confirm the view of a conscientious solicitor that, apart from that option, the title was good, as he reported to the plaintiff in his letter of 4 December 1996. I have no doubt that it was for the same reason that Mr Hodgson informed the mortgagee's solicitors that he would not be raising any requisitions. There was no reason for him to do so. It is taking the matter more than one step too far to use this to ascribe notice of any unregistered agreements to the plaintiff. 39. The only other matter concerning Mr Hodgson is his inclusion in the draft provisional sale and purchase agreement of a figure of $10,707,000.00 to reflect the value of the Cheung Chiu Po option, a precise figure, which Mr Wong says he did not discuss with him in advance of its inclusion. As Sir John Swaine has pointed out, there is no mystery about this. The option was for ground and mezzanine floor units each of 1,427.60 square feet, as also noted by Mr Hodgson in his title report of 4 December 1996. The prices expected for the completed units were $4,500.00 and $3,000.00 a square foot for the ground and mezzanine floors respectively. A simple multiplication of the two gives $10,707,000.00. Again, attempts by the defendants to put some sinister aspect on this must fail. 40. The next matter is the Cheung Chiu Po option itself. This is pointed to by the defendants on the basis, as I understand it, that if there is one there may be others, not registered, and a careful purchaser would have checked. I regret that I cannot see why. One option may well be a result of the "last unit syndrome", and the fact that one is registered is more likely to lead to the conclusion that if there are others, they will be registered also, rather than giving rise to suspicions that other, unregistered, options exist. 41. The last matter relied on by the defendants is apparent admissions by Cheng Kwok Tung, at meetings with the defendants after they had learnt of the sale, that the plaintiff knew of problems with the title. Mr Lee says that this points to collusion between the plaintiff and Full Country. It should be noted that at that time, Cheng Kwok Tung was faced by a lot of angry people who believed, with some justification, that they had been cheated by him and his company. He had every reason to try to spread the blame for what had happened to divert attention from himself. Even then he is not specific in his allegations, referring to "the title on the land was chaotic.." and "the title deeds were not clean, i.e. there were some rights..". I have no hesitation in rejecting this as evidence of either, at best, notice of any defect in title, and at worst, a conspiracy. 42. For these reasons I am satisfied that no notice of the defendants' options, whether actual, constructive or imputed can be ascribed to the plaintiff. Further, as I have already found, the plaintiff has adduced ample evidence that the dealings with Full Country were nothing less than arm's length commercial transactions entered into on a bona fide basis by the plaintiff. Although it may not be unknown for large and apparently well established and respected companies to enter into the sort of transaction which the defendants allege took place here, I find it difficult to believe that they would do so and still pay the market price, or very near it, for a property which may involve them in years of expensive litigation. It does not make commercial sense, and from the evidence here it is apparent that one of the plaintiff's principal considerations has been the commercial aspect and the benefit of the transaction to its parent company China Merchants Properties. 43. The only other matter I would mention is the suggestion by Mr Lee that the plaintiff has failed to call other witnesses who might have shed light on the dealings between the parties. 44. It is, of course, a matter for the plaintiff as to who is called as a witness, and it is sensible to call those who have the most, and best, knowledge of the events surrounding the matters the court has to decide. Mr Lee contends that Mr Ma, Mr Hodgson or Mr Fan, another solicitor with Livasiri, and Mr She ought also to have been called. The plaintiff elected to call only Mr Wong. I have no difficulty with this. Mr Wong was clearly the one most closely acquainted with events, who had direct negotiations, and was the driving force in them. He was the obvious witness. I agree that the others mentioned may have shed light on some areas but what, if any, is speculation, and I am satisfied that the evidence I have had is sufficiently complete and cogent to enable a view of the matters before me to be made without having to wonder what another might have said. This is not a situation as in Lennards Carrying Company Ltd v Asiatic Petroleum Company Ltd [1915] AC 705, where the managing director, Mr Lennard, who was described by Viscount Haldane LC as "the natural person to come on behalf of the owners and give full evidence" and whose "action is the very action of the company itself" did not give evidence. Nor as in British Railways Board v Herrington [1972] AC 877 where the appellants called no evidence at all, thus, per Lord Diplock, "depriving the court of any positive evidence". The plaintiff has called evidence, and, as far as I am concerned, very convincing and complete evidence. The fact that there may be other witnesses who could also have given evidence does not detract from that which has been given. 45. I am bound to say that I have a great deal of sympathy for the defendants in this case. They have every reason to feel deeply aggrieved. But I am satisfied that it is not the plaintiff who is the author of their misfortune. For the reasons given above I find that the plaintiff is entitled to the priority given to them by the Land Registration Ordinance and to the relief they seek. 46. I will hear the parties as to the consequential orders to be made and as to costs.
Representation: Sir John Swaine, SC and Mr Andrew Mak, instructed by Messrs Gallant Y T Ho & Co., for the plaintiff Mr Martin Lee, SC and Mr Jeremy Cheung, instructed by Messrs Joseph Li & Co., for the defendants Mr Ronny Tong, SC and Mr Jat Sew Tong, instructed by Messrs P C Woo & Co., for the 2nd Third Party |
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